The United Arab Emirates requires all businesses to hold a proper and legitimate license to do business there. Since it’s important, business owners are responsible when getting their licenses. However, sometimes, it becomes confusing for business owners to distinguish between a trade license and commercial license. Though many feel the two words can be used the same, they each serve a different function in company formation. So, in this guide, you’ll find the key difference between trade and commercial license in UAE, their roles, and when to use each for diverse business actions.
What Does a Trade License Mean In the UAE?
A trade license in Dubai is a necessary permit for businesses trying to operate legally in the UAE. The UAE government issues trade licenses to firms or entrepreneurs authorized to undertake legal trading activities in a particular area.
Licenses legitimise a business with official approval and help it to obey all applicable laws. An individual or corporation cannot be legally run in the UAE if a trader holds no valid trade license. There are three trade license types, commercial, professional, and industrial, each for a particular business type.
What Does a Commercial License Mean In the UAE?
A commercial license in Dubai is another name for a trade license. Many business setups that handle physical items in trade or supply specific services take this license. It is most beneficial for companies that trade real products by handling wholesale, retail, shipping, and logistics.
This license is suitable for businesses aiming to carry out commercial activities and is provided by the Department of Economic Development (DED) or Free Zone Authorities in the UAE. One or more Limited Liability Companies (LLC) with up to 50 shareholders can be set up with one license under these regulations. Each person’s responsibility is limited to what they have already put into the company.
Differentiation Between Commercial and Trade Licenses In the UAE
The table below shows the difference between trade and commercial license in UAE:
| Key Aspect | Trade License | Commercial License |
| License Nature | This authorization permits a company to do any legal business activities within the UAE. | This trade license is given to companies that buy and sell goods or provide specific services. |
| Flexibility of Activities | Specifically built to be flexible, it can support commercial, professional, or industrial operations as needed. | Sticking to activities allowed under the licensing license is less flexible than normal operation. Regular updates are required to include new activities. |
| Scope of Use | Businesses must register before they can operate in the UAE jurisdiction. | Designed for companies dealing with real products, whether for trading locally or overseas. |
| Documentation | Business engaged in these activities must prepare standard registration documents for use in many sectors. | Additional paperwork, such as details on the goods, customs registration, or documents related to shipping, might be needed based on the nature of the business. |
What Type of Activities Can Be Included in a Commercial License?
These are the activities covered by a commercial license in the UAE:
- Trading of Products
Having a commercial license allows businesses to sell and purchase a diverse selection of goods in multiple fields of industry. Trade of electronics goods, textile materials, food products, machinery and equipment, and luxury goods is a part of this.
- General Trading
Such a license permits businesses to trade various items, even those from diverse fields, together under the same document. With this, large-scale organizations can cover various goods without requesting separate approvals for product types.
- Industrial Activities
Many industries are eligible for a commercial license because it is general and flexible. Logistics, supply chain, retail, and wholesale belong to these industries. A commercial license assists any business establishment in warehousing, shipping, and distribution.
- Real Estate Activity
If you’re interested in the real estate industry, a commercial license lets you start your own real estate agency or leasing company with zero corporate tax.
How to Choose the Right License for Your Business in the UAE?
Whether you need a trade or commercial license depends on what kind of work your business does and its size. If the main reason for your business is to trade in any or multiple products, a trade license is what you should apply for. On the other hand, if you provide a mix of products and services, a commercial license better reflects your business.
When you choose the right license for your company, you should also keep in mind the following additional factors:
- Necessary approvals
- Business type
- The business can be either in a free zone or on the mainland.
- Ownership structure
Final Words
Understanding the difference between trade and commercial license in UAE is essential to operate your company effectively. A trade license is often used for any operation regulated by local laws, but a commercial license is meant for companies involved in the dealing of goods or services. The right license should be picked based on your business activities, location, legal structure, and business model. Moreover, having the proper license is essential to protect your business in the UAE and increase its chances of lasting success.
But if selecting between a trade license and a commercial license is tough, consult Xpert Advisory! Our business setup consultants let you manage your company smoothly by handling everything correctly and ensuring compliance with the UAE regulatory authorities. So, book your consultation today and avoid costly fines with our trusted guidance!
FAQs
Is a Trade License the Same as a Commercial License In the UAE?
A commercial license is a subtype of a trade license. Many business activities can be part of the commercial license category, like trading, contracting, and providing services.
Which Type Of License Is Needed For Import And Export Practices In the UAE Market?
A trade license is required because it is meant for businesses that handle the import, export, and distribution of goods.
Is It Possible to Conduct Multiple Business Activities Under One UAE License?
Yes, multiple activities are permissible under a single commercial license, as long as they are from the same category and are approved by the Department of Economic Development (DED).
